Three introductory things to know about Risk Management

If you went to work this morning, you took a risk. If you rode your bicycle, walked, or drove a car, you took a risk. If you put your money in a bank, or in stocks, or under a mattress, you took risk. If you bought a lottery ticket or gambled at a casino, you were engaging in activities that involve an element of chance – something intimately connected with risk.

Let’s take a closer look:

The word “risk” comes from ancient Italianrisicare, which means“to dare”. In that sense, risk is an option, and not fate. Our freedom of choice depends on the actions we dare to take. The study of risks began in the Renaissance, when people released themselves from the constraints of the past and openly challenged the sacred beliefs. It was an era when the world was discovered and greatly explored. There are many definitions around for “risk management” and the one thing they have in common is that they are rather abstract.

The main objective of risk management is simply to improve the way uncertainty is managed. Within that focus there are two sub-objectives: (a) open minds to the full range of things that may happen in future (i.e. to take off the mental blinkers we wear most of the time) and (b) help people cope with the complexity thus revealed and so act in accordance with their expanded view. Whether it’s reminding an accounts clerk that bank statements and cash books can be wrong so reconciliation is needed, or helping an executive director think widely about the future direction of an organization, the mind has to be open or risk management seems unnecessary. Psychologists have shown that we tend to be overconfident in predictions and believe we have more control than is really the case.

No one started with risk management as part of the management cycle – they each had to learn what risk means, establish a foundation, and then integrate risk management into existing management processes.

What became clear in retrospect is that management cycles can be enriched and improved by the use of risk management.

Like this:

Related

Pétanque NXT

We partner with companies who want to understand and integrate the new 4IR–driven possibilities to reduce cost, improve how they serve their customers and ensure their leadership position in the new business landscape.